RBI’s New Regulations To Make It Easier For Startups To Raise Foreign Funding

The Reserve Bank of India (RBI) is planning to introduce regulatory changes to ease cross-border transactions for startups in India. This will enable startups to receive foreign VC investments without any restrictions. The changes will be finalised in consultation with the government.

Following are the key recommendations of RBI:

• Startups will be able to access offshore rupee loans. The move is being made amid concerns over a decrease in private funding to startups.
• Startups will be able to transfer shares to other residents or non-residents.
• RBI will facilitate the issuance of innovative FDI instruments like convertible notes by startup enterprises.
• In case of transfer of ownership of a startup enterprise, receipt of the consideration amount on a deferred basis up to a period of 18 months.
• To simplify paperwork, RBI would enable the online submission of forms for outward remittances.
• The process for dealing with delayed reporting of FDI-related transaction will also be eased by building a penalty structure into the regulation itself.
• RBI has created a dedicated mailbox, helpstartup@rbi.org.in, to provide assistance and guidance to the startup sector. Physical forms will be discontinued from Feb 8 and all investment and financial transactions will be reported on its electronic platform.

Suchit Punnose, founder of Red Ribbon Advisory Services said, “Time consuming procedures like obtaining licenses, reporting procedures and raising funds required for running an enterprise will now be eased through the conducive investment framework announced by RBI. These moves are poised to give a fillip to the start up sector and improve the sentiment towards government procedures.”

The announcement comes in harmony with the government’s Startup India initiative. RBI Governor, Raghuram Rajan in his policy statement said, these steps will help  to ease doing business and contribute to an ecosystem that is conducive for growth of startups.

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